Arvindbhai Maniar Charitable Foundation, RAJKOT-GUJARAT V. The Commissioner of Income Tax, Rajkot-1, RAJKOT-GUJARAT

ITA 454/RJT/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8557 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-07-2014
• Assessment Year: misc
• Appeal Filed On: 26-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: J C RANPURA
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM ITA NO. 454/RJT/2013 ARVINDBHAI MANIAR CHARITABLE FOUNDATION, 303, RAJKAN APARTMENT, 15, PANCHNATH PLOT CORNER, RAJKOT PAN : AAKCA 1785 D ( / APPELLANT) THE COMMISSIONER OF INCOME-TAX RAJKOT-I, RAJKOT / RESPONDENT / ASSESSEE BY SHRI J.C. RANPURA, CA / REVENUE BY SHRI M L MEENA, DR / DATE OF HEARING 01.07.2014 !'# / DATE OF PRONOUNCEMENT 12.08.2014 / ORDER THIS APPEAL BY THE ASSESSEE-TRUST IS AGAINST THE OR DER DATED 17.10.2013 OF COMMISSIONER OF INCOME-TAX, RAJKOT-I, RAJKOT REJECT ING THE APPLICATION MADE BY THE ASSESSEE-TRUST SEEKING APPROVAL U/S 80G(5) OF THE I NCOME-TAX ACT, 1961. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE-TRUST NAMELY ARVINDBHAI MANIAR CHARITABLE FOUNDATION MADE AN APPLICATION FOR APPRO VAL U/S 80G(5) OF THE INCOME-TAX ACT ON 17.04.2033 IN THE PRESCRIBED FORM NO.10G ALO NGWITH PHOTOCOPY OF THE TRUST DEED AND REGISTRATION CERTIFICATE DATED 12.01.2012. THE MAIN OBJECTS OF THE TRUST, AS PER TRUST DEED, ARE TO CARRY OUT EDUCATIONAL ACTIVI TIES. IN PURSUANCE TO THE ASSESSEE- TRUSTS APPLICATION FOR RECOGNITION U/S 80G(5), TH E ASSESSEE-TRUST WAS ASKED TO EXPLAIN BY THE LD. CIT AS TO HOW THE ACTIVITIES ARE IN ACCORDANCE WITH THE ASSESSEE- TRUSTS OBJECTS PRESCRIBED IN THE MEMORANDUM OF ASS OCIATION AND ALSO ASKED TO PRODUCE BOOKS OF ACCOUNTS, RELEVANT VOUCHERS, DONAT ION BOOK AND MINUTES BOOK IN ORIGINAL ON 03.10.2013. IN RESPONSE, THE ASSESSEE-T RUST PRODUCED THE DETAILS AND SUBMITTED THAT THE MAIN ACTIVITY OF THE TRUST IS AR THIK UNNATI SCHEME. THEREFORE, THE LD. CIT ASKED THE ASSESSEE-TRUST TO PROVIDE THE DET AILS OF ARTHIK UNNATI SCHEME AND ALSO ASKED TO EXPLAIN AS TO HOW THIS ACTIVITY UNDER ARTHIK UNNATI SCHEME AS CHARITABLE ACTIVITY. IN RESPONSE, THE ASSESSEE-TRUST MADE A WR ITTEN SUBMISSION DATED 11.10.2013 WHICH WAS NOT FOUND TENABLE BY THE LD. CIT. THERE FORE, THE LD COMMISSIONER OF INCOME-TAX, RAJKOT-I, RAJKOT VIDE IMPUGNED ORDER DA TED 17.10.2013 REJECTED THE APPLICATION OF THE ASSESSEE-TRUST SEEKING RECOGNITI ON U/S 80G(5) OF THE ACT FOR THE 2 454-RJT-2013 - ARVINDBHAI MANIAR CHARITABLE FOUNDATION-80G(5)-(SMC) DETAILED REASON GIVEN IN PARAGRAPH NOS.4-7 OF THE IMPUGNED ORDER, WHICH READ AS UNDER:- 4. THE EXPLANATION OF THE TRUST IS CONSIDERED, BUT THE SAME IS NOT FOUND TENABLE. ON GOING THROUGH THE ABOVE EXPLANATION IT IS SEEN THAT THE TRUST MERELY SUBMITTED THAT IT GAVE EMPLOYMENT TO UNEMPLO YED UNSKILLED PERSONS. PERUSAL OF THE BOOKS OF ACCOUNTS AND OTHER DETAILS PRODUCED SHOWS THAT THE TRUST IS RECRUITING UNEMPLOYED PERSON AND DEPLOYING THEM WITH ITS CLIENTS AS SECURITY / WATCHMAN, FOR A NORMAL COMMERCIAL RATES. THE TRUST DULY ADMITTED THAT IT IS PAYING MINIMUM WAGES TO SUCH PERSONS AS PER THE LAW. THUS PAYMENT OF MINIMUM WAGES FOR SERVICES TAKEN IS NOT A CHARITY. 5. ON GOING THROUGH THE FINAL ACCOUNTS FOR FY 2012- 13, IT IS SEEN THAT THE TRUST EARNED PROFIT OF RS.7,26,300/- ON RECEIPT OF CHARGES OF RS.2,12,50,281/- FOR PROVIDING MAN POWER SERVICES. THUS, IT IS ALSO CLEAR THAT ACTIVITY OF PROVIDING POWER UNDER THE NOMENCLATURE OF ARTHIK UNATI SCHEME IS A COMMERCIAL ACTIVITY. AS PER THE PROVISIONS OF PROVISOS APPENDE D BELOW SEC. 2(15) OF THE ACT, ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHA LL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR A BUSINESS FOR A FEE, CESS OR ANY CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OF THE INCOME OF SUCH ACTIVITY, IN CASE ITS GROSS R ECEIPTS EXCEEDS RS.25 LAKHS. THE MAIN OBJECT OF THE COMPANY TRUST CLEARLY SPELL OUT THAT NO OBJECTS OF THE COMPANY SHALL BE CARRIED OUT ON COMMERCIAL BASIS. T HE COMPANY IS CARRYING OUT ITS ACTIVITIES ON COMMERCIAL BASIS. 6. AS DISCUSSED ABOVE, THE TRUST IS PROVIDING SERVI CE OF MAN POWER SUPPLY TO BANKS FOR SERVICE CHARGES AND EARNS INCOME FROM THIS ACTIVITY. ITS GROSS RECEIPTS FROM SUCH ACTIVITY DURING THE FY 2012-13 W AS RS.2,12,50,281/- I.E. MORE THAN RS.25 LAKHS. HENCE IN VIEW OF THE ABOVE D ISCUSSED SEC. 2(15) OF THE ACT, NATURE OF THE ACTIVITIES OF THE TRUST IS NOT C HARITABLE BUT IS COMMERCIAL. FURTHER, THE TRUST DID NOT MAINTAIN SEPARATE ACCOUN TS FOR THIS ACTIVITY AND EARNED PROFIT OF RS.7,26,300/- FROM SUCH COMMERCIAL ACTIVITY. 7. KEEPING IN VIEW THE ABOVE FACTS, IT IS CLEAR THA T ACTIVITIES OF THE TRUST ARE NOT CHARITABLE, HENCE, THE TRUST HAS FAILED IN COMP LYING WITH THE REQUIREMENTS FOR APPROVAL U/S 80G AS LAID DOWN UNDER SECTION 80G (5) OF THE ACT AND RULE 11AA OF I.T. RULES 1962. THE APPLICATION MADE BY TH E ASSESSEE SEEKING APPROVAL U/S 80G(5) IS THEREFORE REJECTED. AGGRIEVED WITH THE ORDER OF LD COMMISSIONER OF INC OME-TAX, RAJKOT-II, RAJKOT, THE ASSESSEE-TRUST IS NOW IN APPEAL BEFORE THIS TRI BUNAL, ON THE FOLLOWING GROUNDS:- THE LEARNED COMMISSIONER OF INCOME-TAX-I, RAJKOT [ HEREINAFTER REFERRED TO AS THE CIT] HAS ERRED ON FACTS AND IN LAW IN REJECTI NG APPELLANTS APPLICATION U/S 80G(5) OF THE ACT FOR GRANTING EXEMPTION U/S 80G(5) (VI) OF THE ACT. THE LEARNED CIT BE DIRECTED TO GRANT RECOGNITION U/S 80G(5)(VI) OF THE ACT. 3. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE-TR UST, SHRI J.C. RANPURA, CA, APPEARED AND CONTENDED THAT THE ACTIVITIES OF ASSES SEE-TRUST IN PROVIDING EMPLOYMENT OPPORTUNITIES TO THE NEEDY PEOPLE UNDER THE PROJECT NAMED ARTHIK UNNATI PROGRAME ARE PURELY IN THE NATURE OF CHARI TABLE IN AS MUCH AS IT IS BENEFICIAL 3 454-RJT-2013 - ARVINDBHAI MANIAR CHARITABLE FOUNDATION-80G(5)-(SMC) TO THE PUBLIC AT LARGE AS IT IS IN THE NATURE OF AD VANCEMENT OF OTHER OBJECT OF GENERAL PUBLIC UTILITY AS SUCH ACTIVITIES ARE FULFILLING EM PLOYMENT IN THE SOCIETY. THE LD. COUNSEL OF THE ASSESSEE-TRUST ALSO POINTED OUT THAT AT THE TIME OF GRANTING APPROVAL FOR EXEMPTION U/S 80G, ONLY OBJECT OF THE TRUST IS REQUIRED TO BE EXAMINED AND APPLICATION OF FUNDS CAN BE EXAMINED BY ASSESSING O FFICER AT THE TIME FRAMING ASSESSMENT. IN SUPPORT OF THIS, LD. COUNSEL OF THE ASSESSEE TRUST RELIED UPON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN ITS JUDGMENT DELIVERED ON 02.05.2013 IN THE CASE OF CIT V. O.P. JINDAL GLOBAL UNIVERSITY, REPORTED IN (2013) 38 TAXMANN.COM 366 (P&H). THE LD. AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE-TRUST ALSO RELIED UPON THE DECISIONS OF ITAT, SMC BENCH, RAJKOT IN THE CASE OF ROGI KALYAN SAMITI VS. CIT-II IN ITA NO.25/RJT/2013 WHER EIN THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. RED ROSE SCHOOL, 212 CTR (ALL) 394, WHEREIN THE TRIBUNAL, WHILE CONS IDERING THE APPLICATION U/S 12A(AA) OF THE ACT, HELD THAT SECTION 12AA DOES NOT SPEAK ANYWHERE THAT THE CIT, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. FURTHER, THE LD. COUNSEL OF THE ASSESSEE-TRUST ALS O RELIED UPON THE DECISION OF CO-ORDINATE BENCH, ITAT CHENNAI D BENCH IN THE CA SE OF NELLAI TUTICORING NADAR VS. DIT (EXEMPTIONS), 47 SOT 244 (CHENNAI) WHEREIN IT WAS HELD THAT WHEN THE OBJECTS OF THE SOCIETY ARE NOT FOUND TO BE NOT CHAR ITABLE IN NATURE AND THE SOCIETY CONTINUES TO BE REGISTERED UNDER S. 12AA AND THE RE ASONINGS GIVEN THE DIRECTOR OF IT (EXEMPTIONS) TO DENY RENEWAL OF APPROVAL U/S 80G BE ING NOT SUFFICIENT AND PLAUSIBLE, THERE IS NO REASON TO DENY EXEMPTION UNDER S. 80G T O THE SOCIETY. HE ALSO RELIED UPON THE DECISION OF ITAT KOLKATA B BENCH IN THE CASE OF BENGAL HOSIERY ASSOCIATION VS. DIT (EXEMPTIONS) 18 ITR (TRIB) 208 (KOLKATA), WHEREIN IT WAS HELD THAT REGISTRATION OF AN INSTITUTION U/S 12A BY ITS ELF IS A SUFFICIENT PROOF OF THE FACT THAT TRUST OR THE INSTITUTION IS CREATED OR ESTABLISHED FOR CHARITABLE/GENERAL PUBLIC UTILITY PURPOSES AND IT ENJOYS APPROVAL U/S 80G. RELYING OF THE AFORESAID DECISIONS/JUDGEMENTS, TH E AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE-TRUST PLEADED THAT THE LD. COMMISSIONER OF INCOME- 4 454-RJT-2013 - ARVINDBHAI MANIAR CHARITABLE FOUNDATION-80G(5)-(SMC) TAX, RAJKOT-I, RAJKOT BE DIRECTED TO GRANT THE APPR OVAL U/S 80G(5) OF THE INCOME-TAX ACT, 1961 AS SOUGHT BY THE ASSESSEE-TRUST. 4. AS AGAINST THE AFORESAID SUBMISSION; SHRI M L ME ENA, DR, APPEARED ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF L D. COMMISSIONER OF INCOME-TAX, RAJKOT-I, RAJKOT. HE SUBMITTED THAT THE ASSESSEE-T RUSTS MAIN OBJECT IS EDUCATIONAL ACTIVITIES; WHEREAS THE ACTIVITY UNDER ARTHIK UNNA TI SCHEME CARRIED OUT BY THE ASSESSEE-TRUST US TO PROVIDE EMPLOYMENT OPPORTUNITY TO NEEDY AND UNEMPLOYED PEOPLE OF THE SOCIETY. HE RELIED UPON THE FOLLOWING DECISIONS:- I) KANTILAL MANILAL CHARITABLE TRUST V. DIT (EXEMP TION), AHMEDABAD [2014] 42 TAXMANN.COM 224 (AHMEDABAD TRIB.) II) MADANI MUSAFIR KHANA WELFARE SOCIETY V CIT [2004] 139 TAXMAN 384 (PAT). II) D.R. RANKA CHARITABLE TRUST V. DIT (EXEMPTIONS ) [2010] 3 ITR (TRIB) 151 (BANG) CONTINUING HIS ARGUMENTS, HE SUBMITTED THAT THE VIE W TAKEN BY THE LD COMMISSIONER OF INCOME-TAX, RAJKOT-I, RAJKOT REJECT ING THE APPLICATION U/S 80G(5) OF THE INCOME-TAX ACT BE UPHELD. 5. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND THE CASE LAWS BROUGHT TO MY NOTICE. IT IS UNDISPUTED FACT THAT T HE ASSESSEE-TRUST CONTINUED TO BE REGISTERED U/S 12A(1)(AA) OF THE INCOME-TAX ACT, 1961 VIDE CERTIFICATE DATED 30.08.2012, WHICH IS PRODUCED BY THE ASSESSEE-TRUST IN THE PAPER-BOOK FILED BEFORE THE TRIBUNAL. IT IS ALSO PERTINENT TO NOTE T HAT ITS REGISTRATION HAS NOT BEEN WITHDRAWN U/S 12AA(3) OF THE ACT. REGISTRATION OF AN INSTITUTION U/S 12A BY ITSELF IS A SUFFICIENT PROOF OF THE FACT THAT THE T RUST OR THE INSTITUTION CONCERNED IS CREATED OR ESTABLISHED FOR CHARITABLE/GENERAL PUBLI C UTILITY PURPOSES AND IT ENJOYS APPROVAL U/S 80G OF THE ACT AS OBSERVED BY T HE CO-ORDINATE BENCH OF ITAT, KOLKTATA B BENCH IN THE CASE OF BENGAL HOSI ERY MANUFACTURERS ASSOCIATION VS. DIT, REPORTED IN (2012) 18 ITR (TRI B) 205 (KOLKATA). WITHOUT PREJUDICE TO THE ABOVE; ITAT, CHENNAI D BENCH ALS O IN THE CASE OF NELLAI 5 454-RJT-2013 - ARVINDBHAI MANIAR CHARITABLE FOUNDATION-80G(5)-(SMC) TUTICORIN NADAR VS. DIT (EXEMPTIONS), REPORTED IN ( 2011) 47 SOT 244 (CHENNAI) (TRIB), WAS HELD AS UNDER:- 5. IT IS SEEN THAT NONE OF THE CONDITIONS MENTIONE D IN THE CIRCULAR HIT THE CASE OF THE ASSESSEE FOR RECOGNITION U/S 80G(5) R.W.S 2( 15) OF THE ACT. OBVIOUSLY, THESE ARE INCLUSIVE AND NOT EXHAUSTIVE AS WE HAVE M ENTIONED ABOVE. CONSEQUENTLY, WHEN THE OBJECTS OF THE SOCIETY ARE N OT FOUND TO BE NOT CHARITABLE IN NATURE AND THE SOCIETY CONTINUES TO B E REGISTERED U/S 12AA OF THE ACT AND THE REASONINGS GIVEN BY THE DIT(E) TO DENY RENEWAL OF APPROVAL U/S 80G BEING NOT SUFFICIENT AND PLAUSIBLE, WE DO NOT F IND ANY REASON TO DENY EXEMPTION U/S 80G OF THE ACT TO THE SOCIETY. WE, TH EREFORE, DIRECT THE DIT(E) TO GRANT APPROVAL U/S 80G TO THE ASSESSEE-SOCIETY. APART FROM ABOVE, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DIT(E) V. AHMEDABAD MANAGEMENT ASSOCIATION IN TAX APPEAL N O.707 OF 2013 ALSO HELD THAT WHERE THE PURPOSE OF A TRUST OR INSTITUT ION IS RELIEF OF THE POOR; EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CH ARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF THE COMMER CIAL ACTIVITIES. THEREFORE, KEEPING IN VIEW THE RATIO OF AFORESAID J UDGMENTS, I SET ASIDE THE IMPUGNED ORDER OF LD COMMISSIONER OF INCOME-TAX, RA JKOT-I, RAJKOT AND DIRECT HIM TO GRANT THE APPROVAL U/S 80G(5) OF THE INCOME-TAX ACT , 1961 TO THE ASSESSEE-TRUST. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- ( $.. &' / T. K. SHARMA) ( ) /JUDICIAL MEMBER *)& +) ,/ ORDER DATE: 12.08.2014 !$ /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- ARVINDBHAI MANIAR CHARITABLE FOUNDATI ON, 303, RAJKAN APARTMENT, 15, PANCHNATH PLOT CORNER, RAJKOT 2. / RESPONDENT- THE COMMISSIONER OF INCOME-TAX, RAJK OT-I, RAJKOT 3. ,0,1 * * 2 / CONCERNED CIT-I, RAJKOT 4 . 345 1, * 1#, !$ / DR, ITAT, RAJKOT 5 . 57 89 / GUARD FILE *)& / BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT